Key Takeaways:

  • Selling an LLC business involves multiple steps, including valuation, preparing the business for sale, finding buyers, and negotiating a deal.
  • The method of ownership transfer depends on whether you’re selling the entire LLC or just a membership interest.
  • Legal and financial considerations, such as tax consequences and compliance with operating agreements, play a critical role in the process.
  • Marketing your business effectively increases your chances of finding the right buyer and securing a favorable sale.
  • Business brokers and attorneys can provide valuable assistance to ensure a smooth transaction.
  • UpCounsel can connect you with experienced business attorneys to help navigate the legal complexities of selling an LLC.

Knowing how to sell an LLC in your state involves several key steps, including understanding the tax consequences, setting a realistic price, and finding potential buyers. Having an operating agreement in place can facilitate the process by making certain provisions clear.

Steps in Selling Your LLC

To sell your LLC, follow these steps: 

  1. Figure out a realistic price range.
  2. Know your tax consequences.
  3. Make your business look good in preparation for a sale.
  4. Look for potential buyers.
  5. Negotiate a deal.
  6. Complete a sales agreement.
  7. Plan for closing.
  8. File necessary paperwork with the IRS.

To figure out a fair price, you can base it on the value of your LLC's assets and then add in a portion for the goodwill your company has developed. You might also look at comparable businesses in your area to see how much they sold for.

You can look for potential buyers by doing the following:

  • Placing ads in newspapers
  • Putting ads in trade publications
  • Placing notices on business-sale websites

You might consider hiring a business broker in order to reach more buyers.

When working out terms of your business sale, you should consider important issues, such as whether you'll sell the entire entity or only its assets, and which assets you might like to keep, i.e., a vehicle. You'll also work out payment terms. In many cases, the buyer will put down a down payment and then pay in installments.

Your sales agreement should include the following: 

  • List of assets
  • Value of assets
  • Any contracts the buyer assumes
  • Payment protections for you

At the closing, you'll transfer your business to the buyer. To minimize any last-minute hassles, create a checklist of all the paperwork and documents you and the buyer should bring to this meeting. This includes any payment as well as business keys, alarm codes, and customer lists. 

Once the sale is complete, you and the buyer will have to complete an Asset Acquisition Statement, or Form 8594, from the IRS. Each of you will file the form with your tax returns.

Understanding Business Valuation for an LLC

Before listing your LLC for sale, it’s crucial to determine its value. A comprehensive business valuation considers various factors, such as:

  • Asset-based valuation – Calculating the total value of business assets minus liabilities.
  • Income-based valuation – Assessing the LLC’s cash flow, revenue, and profitability over time.
  • Market-based valuation – Comparing recent sales of similar businesses in your industry.

A professional business appraiser or valuation expert can provide an accurate estimate, ensuring you set a competitive asking price.

Preparing Your LLC for Sale

To attract serious buyers and maximize value, ensure your business is well-prepared for sale:

  • Organize financial records – Prepare profit and loss statements, balance sheets, and tax returns for at least the past three years.
  • Resolve outstanding debts – Paying off liabilities can make your LLC more attractive to buyers.
  • Streamline operations – Improve efficiency by standardizing processes, updating contracts, and addressing any operational weaknesses.
  • Strengthen customer relationships – Retaining loyal customers enhances business value and ensures stability for the new owner.

These steps can significantly increase your LLC’s appeal and help justify your asking price.

Finding the Right Buyer

Finding the right buyer is essential for a successful sale. Consider the following methods:

  • Business brokers – Professionals who specialize in connecting sellers with potential buyers.
  • Online business marketplaces – Platforms like BizBuySell and BusinessBroker.net allow sellers to list their businesses.
  • Networking – Leveraging industry connections and local business groups can uncover potential buyers.
  • Competitor acquisition – Selling to a competitor may be a viable option if they seek expansion.

Pre-screening potential buyers ensures they have the financial capability and genuine interest in acquiring your LLC.

Negotiating the Sale Agreement

Once you have an interested buyer, negotiating a fair deal is the next step. Key considerations include:

  • Structure of the sale – Decide whether you’re selling the entire LLC or just its assets.
  • Payment terms – Buyers may offer lump-sum payments, installment plans, or earn-outs based on business performance.
  • Non-compete clauses – Prevents the seller from starting a competing business within a specific timeframe.
  • Due diligence – Buyers may request access to financial records, contracts, and liabilities before finalizing the sale.

A well-drafted purchase agreement should cover these terms in detail to protect both parties.

Legal and Tax Considerations in Selling an LLC

Selling an LLC has legal and tax implications that must be addressed:

  • State compliance – Each state has specific requirements for business transfers, including filing necessary documents.
  • Capital gains taxes – The IRS may tax the sale as a capital gain, depending on whether you sell the entity or its assets.
  • Transfer of licenses and permits – Certain industries require the buyer to reapply for licenses or permits.
  • Contractual obligations – Any outstanding contracts with vendors, employees, or clients may need to be reassigned or renegotiated.

Consulting a business attorney ensures compliance with all legal obligations and mitigates potential liabilities.

Transferring Ownership of Your Business

You might sell, or transfer ownership of your LLC, for any of these reasons: 

  • A member leaves the company.
  • Existing members wish to bring in a new owner/member.
  • One of the members dies, divorces, or becomes disabled.
  • You want to sell the entire business.

Which procedure you'll follow depends on what exactly you're doing, i.e., selling the entire business or only making changes to the name or ownership percentages of the members.

Each member (also known as an owner) of the LLC has a “membership interest” in the company, or a percentage of ownership. You'll have to transfer membership interests if you want to add members or change a member's ownership percentage.

When you first formed your LLC, you probably created an operating agreement. This agreement outlines the specifics on how your business operates. If your agreement covers buyout or buy-sell procedures, these will determine how you transfer ownership. If your agreement doesn't have provisions for buyouts or buy-sell procedures, check your state guidelines for transferring membership interests.

You might be able to negotiate an agreement among members or create a written agreement to transfer ownership. Some states will require you to dissolve the LLC if your operating agreement doesn't include provisions for ownership transfers.

You'll have to find a buyer and negotiate a price both of you can agree on. You might have to involve a business valuation expert. The buyer may wish to examine your company books as well. A buyer might only want to purchase your business's assets, or he or she may decide to buy the entire company.

If you want to sell an LLC, you'll sell your membership interests via a bill of sale. You can sell your interests for the amount you want if you operate a single-member LLC. However, if you're part of a multi-member business, your operating agreement may have strict rules in place that keep the business value at a certain amount. Other members in the company could also hold rights of refusal.

Selling an LLC is more complicated than forming one. Due to complex tax, financial, and legal implications, you might want to enlist the services of an attorney with experience in the field of LLC sales.

Partial vs. Full LLC Transfers

Ownership transfers can take different forms:

  • Full Transfer – Selling the entire LLC and transferring all assets, liabilities, and responsibilities to the new owner.
  • Partial Transfer – Selling a membership interest while retaining other members in the LLC.

For multi-member LLCs, operating agreements often dictate transfer terms, including whether members have the right of first refusal. In cases where an LLC does not have a defined transfer process, state laws govern how ownership can be reassigned.

Frequently Asked Questions

1. Can I sell my LLC without my co-owners’ approval?

It depends on your operating agreement. Many LLCs have buy-sell provisions requiring member approval before selling membership interests.

2. What are the tax consequences of selling an LLC?

Selling an LLC may trigger capital gains taxes, and in some cases, ordinary income taxes. Consult a tax professional to determine the exact implications.

3. Should I sell my LLC’s assets or the entire business?

Selling assets allows for a clean break but may involve more paperwork. Selling the entire LLC transfers ownership, liabilities, and all existing contracts.

4. How do I determine a fair asking price for my LLC?

A business valuation expert can help determine an accurate price based on financial records, industry benchmarks, and asset valuation.

5. Do I need an attorney to sell my LLC?

While not required, an attorney can help navigate legal requirements, draft agreements, and ensure compliance with state regulations. You can find an experienced business attorney on UpCounsel.

If you need help selling an LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.